Is China an interesting market for your company?
Since a few years now China is no longer the land of cheap 'Made in China' products and cheap labor. Who still has that idea in mind, urgently needs to change that.
This week I met a representative of a foreign SME which just entered the Chinese market. I meet these kind of guys often, fresh of the boat. What always strikes me is that however optimistic, they don't seem to understand what they are getting themself into. The lack of preparation of these companies often is shocking. Often they guy who is chosen to be sent to China received a crash course in Chinese business culture, some introduction about the now about some modern trends in China, a macro-economical outlook and so on. They think they are well prepared, but of course they are not. However, they do know that there are still huge opportunities. Since China has opened itself to the rest of the world in 1978, Western companies have invested massively in the country. Over time more and more jobs got created that, together with the one-child policy, has led to rapid rising salaries. Result is not only that China is heavily focuisn gon automatisation and today is the world's largest market for industrial robots, but also that the country is now witnessing a huge and fast-growing middle class which is obsessed with Western quality products and services. Above allt they now have the budget at their disposal. This creates many new opportunities for western companies. Where formerly China was mainly used as a low cost country for cheap production and export to foreign countries, it is now for many companies one of the most important markets in the world.
The facts speak for themselves. China has become the largest car market in the world for several years now where the major German carmakers such as Audi, BMW and Mercedes sell one-third of all their cars. For the The American China is since 2013 the largest market in the world. The same goes for luxury products. Globally, one third of all luxury brands like Luis Vuitton, Gucci, Armani, etc. are purchased by Chinese customers. Half of all shopping centers under construction are in China. Because of food scandals and higher budget is the growing middle class salso looking for more variety in food. Especially western food is popular. Therefore China will be by 2018 the biggest food importer in the world. There are already more KFCs in China than in the United States, and on average Starbucks opens one new store every day in China. Due to pollution, China is since 2012 also the world's largest investor in renewable energy. China is also digitalizing at tremdenouds speed in which e-commerce and FinTech play a huge role. In the Internet sector Chinese startups have already overtaken Western companies. It may therefore not surprising that all these sectors create opportunities for western companies.
It is clear that China is rapidly reforming and going through an economic transformation that has global implications. The question is whether the Chinese market is also interesting for your business. Although China is a market not to be overlooked, and more and more strategic, they are not all equally lucrative markets. Although China still produces and uses for example 50% of all cement globally, this market already saturated and suffers from overproduction. The same story in the steel industry. In addition, China is not an easy country. Many have tried, but many came back empty-handed. China is not an easy market. There is a lot of competition, it is a very diverse country with many regional, cultural and social differences. Chinese managers are seasoned businessmen. Chinese culture and the way of doing business are radically different from the western way. Moreover, Chinese consumers have developed their own ways and habits, which are often quite different than western best practices. To avoid all these pitfalls good counseling (and by this I mean, GOOD counseling) is often essential. Good preparation, combined with the necessary expertise can help to solve a lot of problems. Go cheap and it will end up very expensively. It is certainly not advisable to explore the Chinese market on your own. But for those who can tame the Chinese dragon, a market of 1.3 billion will open up...